Purchasing your own property brings with it numerous challenges. The focus is on financing: As young people, most people interested in buying have hardly saved any equity, and their salaries are often not enough to make big jumps. This changes with increasing age, but then other obstacles arise: The Residential Property Loan Directive (WIKR), which came into force in Germany in 2016, is interpreted by many banks due to the lack of an implementing regulation in such a way that borrowers have to repay their loan in full within the statistical life expectancy. This shortens the possible term of a building loan for people over 50 and leads to higher requirements from the banks.
Important factors: equity and creditworthiness
The average age of property buyers has increased noticeably in recent decades, observes Udo Zimmermann, a specialist in building financing at Dr. Klein in Buchholz: “The 50 plus generation is no longer uncommon here. We usually find a very good solution.” This is because credit institutions can use some flexibility in the application of the credit line. The following applies to all construction financing: the more equity applicants bring with them, the better. “Best agers should ideally raise more than the generally recommended ten to 15 percent of their own financial resources in order to convince the bank and get good conditions,” says the specialist from Dr. Small. Creditworthiness provides information about how creditworthy a person is. A permanent employment relationship and a regular and sufficient income are crucial. Ideally, a property is fully paid for by the time you reach retirement age. If there is a lack of equity, additional security is an option, says Udo Zimmermann: “An unencumbered property within the family or financial support through gifts or private loans give the bank the security of receiving the outstanding amount even in the event of a loan default.”
Stay flexible with financing
Not every loan can be fully repaid by retirement. The financing should therefore be designed in such a way that the monthly installment can be adjusted at the end of the salary and the start of the pension payment. Tip: Make sure that the repayment rate can be changed free of charge so that you can react flexibly to changes in your income situation. The expert also recommends: “Private pension insurance is often paid out when you leave work, so that a larger sum can be repaid at once.
Text: DJD
